A million in the super fund won't be enough for retirement

While the growth in the projected pool of superannuation savings is impressive, it belies the harsh reality facing those not far off retirement. Increasing life spans, the effect of the GFC on superannuation accounts and the fact that the superannuation guarantee started only in 1992 is leaving older workers underfunded.

And most of those retiring in the next 20 years will not have the lifestyle in retirement they are seeking. They will have to work for longer and increase contributions to their super if they are to afford a comfortable retirement.

That's the bottom line from the latest report on superannuation by Deloitte. While the super pool is projected to rise to $7.6 trillion by 2033 from $1.6 trillion now, many are going to be disappointed with their standard of living in retirement, Deloitte Actuaries and Consultants partner Wayne Walker says.

"Many Australians approaching retirement have received super only for a limited portion of their working lives as our [super] system is still maturing," he said.

"And, with longevity on the rise they have longer retirements to fund. Many older workers will have to work longer and contribute more to their super."

Although younger workers would do better because they would have the benefit of the superannuation guarantee for the whole of their working lives, they would still struggle to afford a comfortable retirement. A 30-year-old worker on an average salary of $60,000 a year would have an estimated $1.1 million in superannuation at age 65 in 2048.

But, Deloitte superannuation leader Russell Mason said, $1.1 million would sustain a comfortable retirement only until age 77.

The Deloitte report, The dynamics of the Australian superannuation system, the next 20 years, 2013-2033, showed that for a comfortable retirement for the standard life expectancy, a 30-year-old male would need retirement savings in 2048 of $1.58 million and a female would need $1.76 million.

For a comfortable retirement, today's 30-year-old needed to make additional contributions to super and salary-sacrifice 5.4 per cent of his pay, and for the woman an extra 7.5 per cent, the report said.

It also shows the retail fund sector - which includes employer-sponsored retail funds and the "personal" division of retail funds - will overtake self-managed super funds to become the largest market segment as early as 2019. The personal division of retail funds, "personal retail", is often recommended by financial advisers to their retiree clients.

But self-managed super funds will eclipse the personal retail segment as the most popular post-retirement vehicle by 2017, the report predicts. Self-managed super funds will continue to grow to become the most popular vehicles for retirees, by far, by 2033. Industry funds will grow strongly and will hold more of accumulators' super savings than self-managed super funds by 2023.